MercadoLibre (NASDAQ: MELI) stock, the “Latin Amazon.com,” jumped nearly 5% in early trading Thursday before turning tail and giving back almost all its gains. (As of 11:30 a.m. ET, MercadoLibre is up only about 0.5%.)
It’s no secret why MercadoLibre popped — Wall Street analyst Marcelo Santos at JPMorgan Chase upgraded the stock to “overweight” this morning. The question is: Why did MercadoLibre stock then drop again?
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In his note today, covered on StreetInsider.com, Santos cites increased “take rates” at Shopee (owned by Sea Limited (NYSE: SE) and based out of Southeast Asia, Shopee has been encroaching on MercadoLibre’s territory in Brazil) as evidence price competition may be abating. (Amazon.com (NASDAQ: AMZN) itself remains a “smaller player” in this market.)
Accordingly, Santos predicts “MELI should be able to sustain a good pace of growth in Brazil in 4Q25, above 30%,” helping the company to hit analyst targets in 2026.
Santos set a $2,800 price target on MercadoLibre shares, implying the stock could rise more than 30% over the next 12 months. But does the analyst’s argument hold water?
Shopee is “taking” a larger share of the total transaction value from purchases made on its platform as revenue. This would imply MercadoLibre’s rival isn’t trading profit margins for market share anymore — or at least not as aggressively as it used to. And that should give MercadoLibre some breathing room to expand its operating margin, which has fallen by 260 basis points over two years.
Assuming MercadoLibre can at least maintain its current 12% margin — sufficient to generate $8.6 billion in free cash flow over the last 12 months and giving the stock a price-to-FCF ratio under 12, the stock looks like a buy — and MercadoLibre stock should not be going down.
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